It’s exactly what happened to Netflix (NFLX), which was removed from the tech-heavy Nasdaq 100 several months back because investors soured on the stock, submerging its market value below that of other potential index members.

Coincidence or something more? Well, at least for the Nasdaq 100, there’s a small body of evidence that booted companies deliver excess returns.

Associated Press

A Netflix envelop containing a DVD to be returned by mail is clipped onto a mailbox, in Springfield, Ill.

Late last year, Schaeffer’s Investment Research analysts Ryan Detrick and Rocky White ran the numbers with a simple question: What happens after a stock leaves the index? Answer: the one-month median return was 2.47%. The three-month is 10.5%, the six-month is 13% and the one-year is 42.6%.

Calculate the average one-year return and it ends up at a pretty impressive 63.6%. Buying the group helps you diversify away the risk that investors were correct to murder the stock.

All these companies endured periods of rotten investor sentiment during 2012. “The group strikes me as risky, volatile, and not exactly screaming ‘value.’ And maybe that’s the point,” I wrote about this group back in December.

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